The History of UK Manufacturing
1.1 Industrial Revolutions
At one point in time, the UK was the pillar of manufacturing and one of the biggest powerhouses in the world.
The Industrial Revolution was the process of changing from an agrarian and handicraft economy to one dominated by industry and machine manufacturing. For Britain, this began in the 18th century and it involved the introduction of new, basic materials such as steel and iron and new energy sources through coal, the steam engine, electricity, and petroleum. These triggered rapid growth in transportation, with the steamship and new railway networks. As a result of this, Britain’s export value increased five-fold1 during the first half of the nineteenth century. The pioneers of industrialisation came mainly from the Midlands and the North of England.
Round 2 – The Second Industrial Revolution
The second industrial revolution began in the 20th century. Although the likes of the US and Germany had overtaken the UK, it still remained a global player and in 1948 manufacturing still accounted for around half of its national output. At this point in time, roughly 48% of the country’s economy came from manufacturing, especially oil and gas extraction and utilities. This era saw the rise of the automatic factory, where huge segments of the industry become machine-focused.
Round 3 – The Third Industrial Revolution
There is a lot of debate around the timings of the third industrial revolution. Most cite it as being between 1990 to 2010s. Dr. David Brown explained the reason as to why we entered the third wave was the same three factors that drove the 1st and 2nd; a new energy source, a new communication system, and a new financial system. This revolution was mainly driven by the introduction of the internet and renewable energy.
Industry 4.0 – The Fourth Industrial Revolution
Many believe that we are now at the precipice of the fourth industrial revolution. The fourth is building on from the third with the digital revolution. It is characterised by a fusion of technologies that are blurring the lines between the physical, digital and biological spheres. The reason as to why it is classed as a separate entity to the third is due to the sheer scale, complexity, and velocity, the rate of technology breakthroughs is nothing like we have seen before.
1.2 Recent Years to Present Time
Around a century and a half ago, Britain was the workshop of the world, today we are more widely known for our tertiary sectors like finance. However, contrary to popular belief, manufacturing still remains an important part of the UK economy, contributing millions of pounds each year. Whilst before we were producing basic products on a mass scale, in more recent years we have seen a shift to smaller companies entering the field, developing unique and specialist goods and services.
Although production may have declined over the years; the UK remains the ninth largest manufacturing nation in the world. In 2018, the UK manufacturing sector employed 2.6 million people, and including the indirect impact, manufacturing accounts for 15 percent of the UK economy. Manufacturing still accounts for 45% of total exports, so opposite to the common opinion that ‘the UK doesn’t produce anything anymore’, manufacturing is still an important component to our society. Manufacturing as a whole still remains strong but what we produce has very much changed. Production has moved away from mining, textiles, and mass production towards more specialised products like pharmaceuticals, food production, or high-tech hardware.
1.3 Sector Breakdown
Manufacturing, of course, is not just a single entity, it comprises of many sub-sectors that each have their own ecosystems. In recent years, the largest manufacturing sub-sector is the production of food products and a lot of this home-based production is down to local tastes and perishability. This is closely followed by metal production, chemicals, and automotive. The illustration below gives an overview of the core UK sectors and their impact on the UK economy.
Food & Beverage
The production of food is one of the oldest in time, so it’s no surprise it still dominates the market. Whist other markets face volatility as they are usually non-essential markets (not everyone needs a new car, but they do need to eat), the food sector tends to have stable or consistent growth. In the UK, it is the largest sub-sector of manufacturing, with giants like Unilever leading the pack. The Food & Drink sector annually adds £21.9 billion to the UK economy and employs 430,000 people. There are a few big players that produce those household brands like P&G or Coca Cola but 96% of the manufacturers in the UK are actually SMEs.
The products produced have an expansive export network that spans over 220 countries, but our biggest export regions include Ireland, USA and France (They just can’t get enough of the Yorkshire Tea). Or according to data, Whiskey, which is the most exported food-related goods out of the UK, closely followed by Salmon and Chocolate.
Currently, there are around 190 medicine manufacturing plants in the UK, yet many are smaller specialists that often focus on early-stage materials. The pharmaceutical sector adds £60 million to the UK’s balance of trade every day.
Generics are a huge proportion of the drugs prescribed in the UK, but these are predominately produced by large generic firms that are based overseas. Domestic demand is being driven by the rising prevalence in chronic diseases, which require more specialist treatments. In order to give the UK a competitive advantage, the UK Research and Innovations (UKRI) plans to shift the focus to our areas of strength which consist of academic research in fields such as biology, chemical, and bio-engineering. The new facilities such as the Medicines Manufacturing Innovation Centre (MMIC) is providing access to the latest technologies to drive innovation in the UK.
In 2018, the UK motor vehicle manufacturing industry contributed £16.6 billion to the economy and 8.5% of the manufacturing output. In the same year, 1.6 million vehicles were produced, 80% of which were exported. For the years prior, the industry has achieved strong growth in employment, production, economic output and exports. However, in 2019 the automotive sector was already facing a tough year, as many UK plants planned to shut down, including Honda’s Swindon location and the Ford Bridgend plant. Unfortunately, the automotive sector was struck again with the pandemic in 2020, where car production and sales came to a complete halt, not only this, the exit from the European Union has presented its own set of challenges, when you consider how many of the exports were to European countries. However, one area that was experiencing more positive growth was the production of electric vehicles, taking over 10% of the UK new car market. With the new Government ruling, that the production of non-electric vehicles must cease by 2030, many producers are switching production and are investing heavily in electric or hybrid vehicle production. Aside from this, there are new entrants in the field, and those that class electric automotive production their specialty is experiencing better growth, such as Tesla. In 2008, the company was producing $15 million in revenue, compared with 2018 where they reached $21 billion in revenue.
Aerospace manufacturing has remained one of the UK’s largest sectors, turning over £31 billion in 2019. The UK also remains the top location in Europe for investment in 2020, according to a PwC report and they are 7th globally. The aerospace sector continues to invest in highly skilled jobs and R&D to create prosperity, with already 31,000 jobs in design and engineering and £1.5bn spent on R&D in 2017. The commercial aviation sector faced massive disruptions due to the pandemic, there was a slowing down for production overall as less people were travelling, but also a lack of demand for spare parts as less maintenance was required.
A sub-division of this that continues to take the industry to new heights, is space manufacturing including developing and building new satellites and new ground systems and components. The UK’s space sector has always had strong foundations, with all 13 UK regions hosting a space organisation and 40% of all small satellites orbiting the planet being produced by the UK. Whist this area experienced less of an impact than the commercial side, there will still be long-term ramifications on the budget side for those dependent on the public sector. In terms of current impact, it has been more orientated around slowing down of product deliveries and mission deployments.
1.4 Regional Hubs
Whilst the UK has specialisms in terms of sectors, there are also core hubs where the production is centred. The greatest concentration of activity is in the Northern Powerhouse belt, contributing to 10% of the jobs in major cities. More specifically, the top location in 2018 for the UK’s high value manufacturing was Sheffield.
However, new analysis of data by Make UK and BDOd revealed that the south-east region is set to become the country’s biggest manufacturing region, overtaking Britain’s traditional industrial heartlands. The growing demand for hi-tech aerospace and electronics products, alongside food and drink, where the region is more prominent, has boosted the region’s growth significantly.
Made UK Outlook Survey presents a regional summary, comparing the change from 2019 to 2020 and highlights the top performing regions for various factors. The North East is leading in terms of output and orders, where Scotland is outperforming the rest in terms of investment.
1.5 Leaders of the Pack
In 2019, Unilever was leading production in the UK, creating £41.8 billion in revenue per year. Overseeing over 400 brands such as P&G and Nestle, the multinational is renowned for its products. One that may not be as familiar as those household brands is Rio Tinto, which is the world’s second-largest metals and mining cooperation, producing aluminium, copper, coal, and other precious metals. For the remaining leaders demonstrated in the graph, they reflect the core industries identified earlier, mainly concentrated in the food and pharmaceutical sector.
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